The Fourteenth Amendment and the Poverty of African Americans

By Ravi Batra

Southern Methodist University, Dallas, TX. 75275

Abstract

Following the Civil War Congress passed the first civil rights act as the 14th amendment to the constitution. It granted citizenship to African Americans and forbade any state government from taking away life, liberty or property of any person without due process of law. However, the amendment benefited the corporations with little help to black Americans. Each time a state decided to curb the monopoly power of a business conglomerate, the courts would step in and proclaim that the state flouted the due process clause. This collusion between the government and corporations has contributed to high rates of poverty in America, especially among African American communities.

Introduction:

The Civil War ended in 1865 and slavery was abolished. A sad chapter in American history was over, but another began soon after. In order to improve the lot of former slaves, Congress amended the constitution in 1968 with the 14th amendment, which granted African Americans citizenship and forbade any state from taking away life, liberty or property of any person without due process of law. However, for several decades, the amendment did little to protect the civil rights of the new American citizens, who were forced to forced live in misery, squalor and poverty – hardly better than slavery. Instead the law became an instrument for rich corporations for self-enrichment. Most state courts ruled that corporations were persons and therefore entitled to protection under the due process clause. Each time a state government passed legislation to curb the antimonopoly and discriminatory practices of a corporation, federal courts would step in and proclaim the state regulations unconstitutional for flouting the due process clause of the amendment. State governments thus became helpless before the might of giant enterprises.

Unencumbered by any state intervention and with federal courts supporting them, corporations throve in America as never before. The economy grew at an unprecedented rate, while small businesses were gobbled up one by one by a few giants. Almost every major industry became a duopoly that earned giant profits from their practices, while working hours were long and real wages were puny. African Americans faced extra hardship from these practices. They faced all sorts of discrimination, social as well as economic. Their unemployment was high and wages were well below those of the white people.

Congress passed the Sherman Anti-trust law in 1889 to outlaw the monopolizing activities of giant enterprises, but as with the 14th amendment, this law was also abused by corporations with the help of their old friends – the federal courts. For the next few decades, the Sherman Act was used by courts to curb the activities of labor unions, while few businesses were barred from acquiring other profitable firms.

When giant enterprises have little competition, labor productivity rises but real wages lag behind. As a result, the wage-productivity gap grows over time, and creates poverty and unemployment in society. This is because productivity is the main source of the supply of goods and services, whereas the real wage is the main source of consumer demand. With the wage gap rising, supply rises faster than demand and results in overproduction, which in turn causes layoffs and a fall in the real wage.

The only way to cure unemployment and raise the real wage without recourse to Keynesian expansionary policies is to either break up the giant firms into smaller competing units or strengthen the labor unions to have a say in the setting of their wages. But Keynesian policies create consumer as well as federal debt and we can see that in the global economy today. Almost every nation has colossal debt by its government, and consumers are also heavily in debt, both of which generate stagnation.

The 1950s and the 1960s

There are two decades in the long American chronicle that illustrate the power of a falling wage gap in reducing poverty for everyone in society. They are the 1950s and the 1960s. During the 1950s, the labor unions were just as strong as the giant enterprises, and the real wage actually grew faster than productivity. Big business faced big labor unions, so that there was some form of bilateral monopoly. The effect of this event is examined in Figure 1. The wage gap may be measured by

WG = productivity/real wage

During the 1950s, this measure of the wage-productivity gap generally fell, and the median real family income saw a substantial rise. Even during the recession years of 1951- 1952 and then 1959 – 1960, the median kept growing, and as result poverty fell among all sections of society including African Americans. However, the rate of profit gradually fell, but was large enough to maintain unemployment in the economy.

During the 1960s the wage gap remained stable at the low level achieved in the 1950s, and both GDP and productivity grew faster than in the previous decade. But thanks to strong labor unions, the real wage kept pace with productivity growth, and the wage gap remained constant. Poverty also fell faster than ever before for all groups.

The 1970s were not so kind to society because of the sharp rise in the price of oil, but poverty rates did not rise. Things changed substantially in the 1980s with the rise of supply side economics that led to a rise in tax rates for the poor and the middle class but a fall in taxes for the rich. Labor unions also became weak.

Figure 1: The Wage-Gap and Poverty – 1950s

Source: Ravi Batra, End Unemployment Now, Macmillan, 2015.

Figure 2: Wage-Gap and the Rate of Profit

Source: Ravi Batra, End Unemployment Now, Macmillan, 2015.

The wage gap began to rise, and whatever GDP growth occurred required debt creation through Keynesian monetary and fiscal policies.

Then came the Great Recession of 2007 that simply decimated the poor and the middle class. Poverty rates sky-rocketed, and continue to be high. According to the Census Bureau, poverty rates are the highest today in the last 50 years. African Americans had to bear the brunt of the slumping economy. The overall rate of poverty in 2017 is about 12 percent among families, but for African Americans, it is double that level at 24 percent.

Conclusion:

The 14th amendment to the constitution was meant to grant citizenship and equal economic rights. But the amendment ended up in creating duopolies and oligopolies. As a result, the constitutional change did not help the masses, and African Americans remained poor for a very long time. Rates of poverty that had fallen steadily from 1950 to 1970 and then remained stable for another decade. They began to rise with the onset of the new economic creed called supply side theory, which was purely trickle down economics. Then came the Great Recession of 2007, and ever since poverty has risen further for the poor and even for those in the middle class. African Americans suffered badly during the recession. Wages and productivity have to grow proportionately for the economy to function well without the help of debt creation policies, which are popularly and euphemistically known as Keynesian policies, which only postpone problems. What we need is either high competition among firms or bilateral monopoly between giant firms and strong labor unions. Such indeed is the dictum of history.